TMI Blog1974 (7) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... Sales Tax Act, 1956. For the year 196869 it reported a total turnover of Rs. 17,59,122.06 and claimed exemption on the entire turnover. The assessing authority, however, found the total turnover to be Rs. 28,30,300 and levied assessment on a net turnover of Rs. 17,59,122.06 after allowing deduction on the balance of the turnover. They purchase raw hides and skins not only from within the State of Andhra Pradesh but also from places outside the State and after tanning them, sell the dressed hides and skins within the State as well as in the course of inter-State trade. They have not, however, maintained separate accounts to identify the dressed hides and skins obtained from raw hides and skins purchased by them within the State, purchased from outside the State and from out of the opening stock at the commencement of the year. They paid tax under the State law on their turnover of raw hides and skins purchased within the State, but in respect of those imported from outside, they have not paid tax. The assessing authority allowed exemption on the turnover relating to purchases of raw hides and skins made outside the State. The dispute mainly revolves round the turnover of Rs. 17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed hides and skins, which have suffered tax at the raw stage. The question that has to be answered, therefore, is whether the benefit of nil rate afforded by sub-section (2A) of section 8 of the Central law is available to dressed hides and skins which have been tanned out of hides and skins which had suffered tax under the State law. That sub-section has an explanation and both of them, as they were before the amendment of 1972, read as follows: "Notwithstanding anything contained in sub-section (1) or subsection (2), if under the sales tax law of the appropriate State, the sale or purchase, as the case may be, of any goods by a dealer is exempt from tax generally or is subject to tax generally at a rate which is lower than three per cent (whether called a tax or fee or by any other name) the tax payable under this Act on his turnover in so far as the turnover or any part thereof relates to the sale of such goods shall be nil or, as the case may be, shall be calculated at the lower rate. Explanation.-For the purposes of this sub-section a sale or purchase of goods shall not be deemed to be exempt from tax generally under the sales tax law of the appropriate State if under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on the problem. It says that where a tax has been levied on declared goods and if they are sold in the course of inter-State trade or commerce, the tax so levied shall be refunded. If goods are generally exempt from tax under the State law no question of refund would arise. Something is refunded only when it has been levied and collected. Levy and collection cannot occur in respect of goods which are generally exempt from tax. This also demonstrates that hides and skins are not generally exempt from tax. Let us compare this with the Fourth Schedule to the Act which gives the list of "goods exempted from tax under section 8". Section 8 of the State law declares that a dealer who deals in goods specified in the Fourth Schedule shall be exempt from tax under the Act in respect of such goods. Likewise section 9 empowers the State Government to notify exemptions and deductions of tax. Thus, the law postulates goods which are exempt from tax or which can be made exempt from tax by a Government notification. Such goods can be broadly categorised as goods which are generally exempt from tax. This is in telling contrast with section 6 and the Third Schedule. This study of contrasts rein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . If Central tax is also exigible on them on account of inter-State trade or commerce, the tax levied under the State law is refunded to the dealer. These various provisions thus demonstrate that declared goods, which include tanned and untanned hides and skins, are not intended to be generally exempt from tax. Here we may also notice some recent amendments made in the Central as well as the State laws. In State of Mysore v. Yaddalam Lakshminarasimhiah Setty and Sons[1965] 16 S.T.C. 231 (S.C.)., the Supreme Court construed the words "levied and collected" and "in the manner" occurring in section 9(1) of the Central law as meaning that the assessment should be made just like it is made under the State law and, consequently, section 9(1) of the Central Act had not made a departure in the manner of levy of tax on specified goods which were taxed only at a single point under the State Act. To get over the legal position thus ensured, in the first place the President of India promulgated an Ordinance in 1969 and later the Parliament enacted an Amendment Act in the same year, whereunder section 6(1A) was introduced in the Central Act. Newly incorporated sub-section (1A) declared that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mption or lower rate of levy under the State sales tax law would be available in respect of an inter-State sale of goods only if such exemption or lower levy is available generally with reference to such goods or such class of goods under the State sales tax law. To complete our consideration of the changes in the law so far effected, we may also refer to another amendment made by the Central Amendment Act, 1972, which is in respect of section 15(b). The courts have construed the word "levied" in section 15(b) as connoting merely the act of assessment and not including the actual payment of the tax imposed. The Parliament thought that the return of the tax to the assessee contemplated by clause (b) can be made only when the tax imposed has been paid and, consequently, added the words "and tax has been paid under this Act in respect of the sale of such goods in the course of inter-State trade or commerce, the tax levied under such law". In the place of refund the word "reimbursed" has been substituted. Exactly on the same lines the proviso in section 6 of the Andhra Pradesh State law was amended by the Amendment Act of 1974. The foregoing discussion, unaided by decided cases, le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of inter-State trade cannot be said to be exempt from tax generally under the State law. We thus reach the same conclusion we have already arrived at by examining the legal position with the aid of the explanation also. At this stage we must take note of a strenuous contention put forward by Sri Sundara Rao, the learned counsel for the assessee, in regard to the construction of item 9(b) in the Third Schedule of the State Act. Drawing support largely from Maxwell and other learned authors, Sri Sundara Rao contends that while construing a statutory provision any omissions should not be inferred. We have no dispute in regard to this principle of construction. But, then have we introduced any omission in item 9(b) before we have construed the law as we have done? It has been held that item 9(b) is not discriminatory and does not offend article 304(a) of the Constitution (vide Associated Tanners v. Commercial Tax Officer[1974] 33 S.T.C. 588. While enacting the Third Schedule including item 9(b), the State Legislature has kept in view the restrictions and conditions in regard to tax on sale or purchase of goods within a State imposed under section 15 of the Central Act. Therefore, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T.C. 430. Raw hides and skins and dressed hides and skins may constitute different commodities or merchandise and they can thus be treated as different goods for the purpose of the State law. We may here refer to the decision of Obul Reddi, J. (as he then was), and Venkateswara Rao, J., dated 10th February, 1971, in T.R.C. No. 11 of 1969, wherein the learned judges observed that though the State Act classifies hides and skins into two categories, raw and tanned, the Central Act does not make any such distinction and treats both varieties as being of special importance in inter-State trade and commerce. Even if the two are treated as different categories under the State law, the Central law treats them both as goods of special importance for the purpose of inter-State trade and commerce and treat them alike. If a particular transaction comes within the scope of section 8(2A) of that law, then it enjoys the benefit of nil tax or reduced rate, as the case may be. So, we are unable to accede to the abovesaid argument of the two learned counsel. Tracing the history of taxation of hides and skins under the Madras General Sales Tax Act and the Rules made thereunder, Sri Sundara Rao poin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. The Tribunal in its majority opinion took the view that the State Legislature had for the purpose of taxation not only chosen to treat tanned hides and skins as a commodity different from untanned hides and skins, but had further chosen to treat tanned hides and skins that had been subjected to tax in the untanned state as a commodity separate and distinct from tanned hides and skins that had not been subjected to tax in the raw state. For that reason, the majority thought that transactions of tanned hides and skins that had already suffered tax in their untanned state are generally exempt from tax and that there is no specified circumstances or conditions. We have already adverted to this contention as put forward by the learned counsel for the assessee. In our view, the line of thought expressed by the majority is not compatible with the language and spirit of section 8(2A) of the Central Act read with the explanation. Sri Sundara Rao also endeavours to demonstrate that if nil tax is not enforced on such transactions there will be any amount of hostile discrimination. He rests this submission on the circumstances that the rates of tax levied by various States differ from ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exempt from tax under the sales tax law of the appropriate State and to make the said sales chargeable at lower rates, where under the sales tax law of the State, the sale transactions are chargeable to tax at lower rates. Where goods are taxable at the point of purchase under the sales tax law of the appropriate State, the sale is not exempt from tax generally or where the goods are taxable at the point of sale, the transaction of purchase is not exempt from tax generally. The plain meaning of the said sub-section is that, if under the sales tax law of the appropriate State no tax is levied either at the point of sale or at the point of purchase at any stage, the tax under the Act shall be nil." This view accords with the opinion we have expressed above. The Punjab and Haryana High Court agreed with this conclusion in State v. Indian Aluminium Cable Ltd.[1974] 33 S.T.C. 152. There the assessee who had sold electric poles and cables in the course of inter-State trade, claimed exemption from the Central sales tax by reason of the provisions of section 5(2)(a)(iv) of the Punjab General Sales Tax Act, 1948, read with section 8(2A) of the Central Act. Under section 5(2)(a)(iv) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... general exemption from tax as contemplated by section 8(2A) and the explanation to that sub-section. The learned judges of the Punjab and Haryana High Court, following these decisions, expressed the view that the provisions of section 8(2A) of the Central Act did not apply to the facts of the case. They also repelled the contention of the learned counsel for the assessee that section 5(2)(a)(iv) of the State Act does not lay down any specified circumstances or conditions, but is merely descriptive of the persons who purchase the goods. Rejecting this contention, it was observed that the exemption cannot be said to be granted generally, because there can be undertakings doing the very job and buying poles or cables. This decision clearly supports our view. We may also usefully refer to the decision of Obul Reddi, J., as he then was, and Venkateswara Rao, J., dated 10th February, 1971, in T.R.C. No. 11 of 1969, which we have already noticed. Dealing with an objection to a claim for refund of the tax in respect of inter-State sales of tanned hides and skins on the ground that they are of a different category from undressed hides and skins, the Division Bench observed: "We are unable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rally by virtue of the notification. In the course of the discussion, the learned judges explained the ambit of the explanation to sub-section (2A) saying that there should be, in order to come within the scope of general exemption, circumstances or conditions, the non-existence or non-performance of which precludes the grant of exemption; so that if those circumstances do not exist or those conditions are not performed, then the sales of goods cannot be exempted from tax even if they are effected by a class of dealers to whom exemption is granted and during the period for which exemption is granted. Since there was a clear notification in this case totally exempting the particular goods from taxation, the conclusion arrived in this decision does not help the assessee, who is before us. We may also point out that this is the decision referred to by the Punjab and Haryana High Court in State v. Indian Aluminium Cable Ltd.[1974] 33 S.T.C. 152. The other case is Sri Krishna Coconut Co. v. Commercial Tax Officer[1968] 22 S.T.C. 404., which is that of a Division Bench of this Court. That relates to tax on watery coconuts. Jaganmohan Reddy, C.J., as he then was, speaking for the court ob ..... X X X X Extracts X X X X X X X X Extracts X X X X
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